Important Facts to Know About Medicare Part D Drug Plans

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Important Facts to Know About Medicare Part D Drug Plans

Medicare provides us an optional program called Part D. This is a type of insurance that will help the insured pay for prescription drugs. A person who chooses to enroll must pay a monthly premium on top of the regular Part B premium. Read on to learn six facts about Medicare Part D drug plans and why this coverage is necessary.

Two Ways to Get Coverage

The first way to get coverage is to add a Part D policy to the original Medicare. This is called a Stand Alone Medicare Prescription Drug Plan. This works like an extension of your original coverage. If anything happens to you and you need prescription drugs, the government insurance will shoulder part of the prescription medicine cost. Most times stand alone Rx coverage is paired with a separate Medicare Supplement policy.

The second way is to join a Medicare Advantage Plan that is offered by private insurance companies like Aetna, Anthem, Humana, United Healthcare and the like. If you do this, make sure you ask enough questions to the carrier and review (or renew) your policy during Open Enrollment between October and December. Different companies offer different coverage so investigate carefully and make sure your needs are met by the plan you buy.

And it’s important to note that not all Medicare Advantage policies include drug coverage. Be sure to look for MAPD plans, not MA only plans. The PD stand for Prescription Drug coverage. Some consumers with creditable drug coverage elsewhere (like the Veterans Administration for instance) are okay with MA only plans.

It Has a Cost

Medical coverage for prescription drugs is not free. This means that despite you paying a monthly premium, you will still pay part of the medicine cost should the time come that you need them. The government or a private insurance company will only share the cost with you but not shoulder the full amount. Some Rx copays will be less than others, so it’s wise to shop around based on the pharmacies you prefer.

There is a Coverage Gap

Also called a donut hole, there is a gap in the coverage of drug insurance. What this means is that there is a temporary limit on the kinds of drugs covered by the insurance plan. This gap begins once you have used up an amount specified by the provider – $3,750. On average, you will pay 35% to 45% of the drug’s cost once you hit this limit.

The coverage gap ends once you and the plan have paid $5,000. Then you’re in the Catastrophic Coverage phase. You will pay a very small amount for almost all of your prescriptions it this time. (At present, the Donut Hole should be closing for all Rx plans in 2019.)

There is a Thing Called Formulary

A Medicare Part D Plan does not entail that you get insured and covered for all kinds of prescription drugs. There is a list called a formulary that stipulates the names of the drugs covered in your plan. This list also includes how much you will pay for the cost and how much the insurance company is going to shoulder.

The formulary includes expensive branded drugs and generic drugs. Knowing this, you need to check this list before enrolling. It does not make sense enrolling if the formulary does not contain the specific drug you need for your medication.

Some Plans Need Prior Authorization

What this means is that before you even qualify, some companies or drug plans require that you meet specific criteria so that the drug can be released to you. For example, your physician may be required to provide a medical synopsis indicating why you need that drug.

The doctor must prove that the drug you are seeking is a medical necessity. The insurance company will ask your doctor if another drug can be used as an alternative. This is the only way the insurance company will let you fill your prescription.

It Costs Less for Some & More for Others

If you qualify for a Low Income Subsidy (LIS for short), then your premiums and copays will be less. The amount of extra help you receive will be based on your household income and tangible assets, like bank deposits, stock, bonds, etc. The government will calculate how much help you get each year toward your premiums and copays.

Conversely, if you are a high income earner, your Part D premiums will increase. The increase will be based on your reported household income from 2 years ago. The government uses a sliding scale to calculate the amount added onto any plan you select. The extra premium ranges from approximately $13-$75 a month. This program is called IRMAA – Income Related Monthly Adjustment Amounts.

It Has a Late Penalty

An amount is added to your premium if you enroll late. You have 6 months surrounding your Part B effective date to enroll. You may be able to defer if you have creditable coverage elsewhere (VA or employer coverage), but most will need to find coverage when first Medicare eligible at age 65. At the moment, the late penalty is calculated by multiplying 1% to the national base beneficiary premium.

As of 2018, the base premium is roughly $35. Then you multiply this by the total number of months that you are not covered, were eligible to enroll, but chose not to enroll. After several months of an accruing penalty, its like paying for two different plans – so it’s usually wise to get a policy when first eligible.

Medicare Part D coverage is essential for people with ongoing prescriptions – and those who want to later avoid a lifetime late enrollment penalty. Work with a licensed insurance agency to make an educated choice about this important coverage.